A revolving credit is usually taken out to finance a number of products. It is therefore not suitable for buying a house or car. It is about more temporary products. For example, you need an advance. It is important that you realize that borrowing money costs money. If you are short of money, it is no problem. But a revolving credit is not suitable for paying off old debts.
A revolving credit is usually provided by a financing company or bank. These companies are licensed by the AFM: the Financial Markets Authority. You don’t just get a revolving credit: you have to meet a number of requirements that the provider imposes on you. The level of your income is also a factor in deciding whether a revolving credit is provided.
Before a revolving credit is provided, the provider will request information about the payment history at the BKR. When a new revolving credit is found to be an agreement, the provider will report this to the BKR. This must be done within four weeks.
With other loans people often talk about a credit sum. However, with a revolving credit this is different. Here we speak of the credit space or a credit limit. Before agreeing to take out the loan, a certain amount is agreed with the provider. This is the maximum amount that can be borrowed without paying off. The repayment then takes place again in a monthly amount.
With many providers you can withdraw an amount in the meantime until the credit limit is reached. Other providers may agree on a date that part of the debt may be repaid and a new amount may be withdrawn.
There is often no practical duration, but a theoretical length is agreed upon. This is because they make a number of assumptions:
- At the start of the loan, the borrower can withdraw the full credit limit in one go;
- The borrower does not make additional repayments before the agreed time;
- The borrower does not follow up with the agreed time;
- The installment is paid on time every month.
With a cheap revolving credit, the repayment method is somewhat more flexible. A date in the month may be agreed. You do not pay high fines for early repayments, as is often the case with other loans. You also do not immediately repay the entire debt, but this is often limited to a percentage of the credit limit.
What does the BKR know?
At the BKR it is known to which credit limit you have borrowed from the provider. With a revolving credit, the BKR does not know exactly how much you still have to pay. Only the amount of the credit limit is reported to the BKR. Therefore, when a new revolving credit is taken out, the new, second lender will be informed of the amount of the credit limit with the other lender. It is therefore beneficial to keep the debits and credits of the revolving credit.
To determine a reliable amount per month, the BKR takes 2 percent of the credit limit as the amount of the loan.
The more you borrow in a cheap revolving credit, the higher the debt becomes. Each provider will issue a statement at a specific time in the month stating exactly how much you can still borrow up to the credit limit. It also states exactly how much you have already paid and how much you still owe.
An important tip is to properly compare which type of loan suits you best. A revolving credit is only necessary to be able to purchase certain products or to temporarily cope with a financial situation. Whoever borrows money must also pay it back. Revolving loans are often used to cover a large debt. This is certainly dangerous when you opt for a variable interest rate.
Cheap borrowing often has something to do with your own choices. It is wiser to borrow when your current income allows it.
You have the option to repay in between during a revolving credit. So if you only need some extra money for a limited time, a cheap revolving credit is definitely a solution.